The Shadow Gold Price: $10,000 An Ounce

We realize that experts the world over say gold is not money, but we can’t help but consider that if central banks are stocking up (ex-US), pension funds are stocking up, big money investors are stocking up, and individuals on the street are moving to diversify into something other than stocks and bonds, that there might be something to this whole “gold is money” theory:

QB Asset Management calculates the so-called “Shadow Gold Price” (“SGP”). It divides the US Monetary Base by U.S. official gold holdings, the same formula actually used during the Bretton Woods regime to fix the exchange value of the dollar at USD 35.00/ounce. It would be the theoretical price of gold today were the Fed to depreciate the USD to a level that would cover systemic bank liabilities (transform a debt-based into a asset backed currency). The current Shadow Gold Price would be just under USD 10,000. This figure illustrates the magnitude of monetary inflation already embedded into the system, sitting latent and threatening to increase the general price level.

At the moment less than 2.6% of US government debt is covered by gold, which is clearly below the long-term median of 5%. Should the gold price therefore double, the coverage would only rise to the long-term median. But this would also require stable government debt, which is less than likely. The highs of the ratio dating from the 1980s would only be reached at a price of about USD 15,000.

If one were to fully cover the current debt with gold, the price would have to increase to USD 57,000/ounce. That said, a full coverage is extremely unlikely; at its highs the ratio was at 55% in 1915 and at slightly less than 25% in 1980.

We find the following quote from Horace most applicable given the chart above:

Naturam expellas furca, tamen usque revenit.
-Horace (65-8 BC)

(You may drive nature out with a pitchfork, she will nevertheless come back)

The manipulators can play with precious metals all they want, but thousands of years of historical precedence simply cannot be erased by the ideologies of a handful of central bankers and politicians.

We would certainly advise our readers to prepare for future calamity by investing in long-term food storage, water reserves, tools, equipment, skills development and other preparedness supplies, but the future potential value of gold in a collapsing economy cannot be discounted. For those with the ability to do so, we recommend looking into silver first, and then gold, as a wealth preservation asset.

After the SHTF, those with real money will be able to use it to acquire assets that will have reached their bottom – for example real estate – and then ride those assets to higher values as the global economy resets and recovers. And in a worst case, even if the entire grid goes down and stock exchanges no longer function, there will always be a buyer for precious metals somewhere.

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Don’t buy into the nonsense of gold and silver. Get all of the crisp $10 bills you can and put them in a #10 can…you won’t be sorry. Don’t waste your valuable federal reserve notes on gold and silver. Sell all of your ammo, food and supplies too. Convert them as quickly as possible to crisp $10 bills and put them in a #10 can. Don’t be fooled!

Why just a #10 can?
Can it be a wicked sense of humor you can put into a can?
Why not $20 bills or $100 bills?
The paper and ink would be fresher for the time when U have to trade them in for the “new” paper money you can put back into the can.Bet there will quite a amount decrease though.
LTR,
GFG

No no no. Go for dollar bills. Then you can use for the nearterm at the titty bar.
Buy junk silver, food and ammo. Oh, and don’t forget popcorn to watch the show. I promise it will be more real than reality TV. I personally have 200 rolls of toilet paper. No way I’m going down with a stinky ass.

While their is no doubt in my mind that our money is manipulated and isn’t worth the paper it is printed on. I have to caution everyone thinking of buying precious metals. Suppose you buy an ounce of silver at 40 an ounce, who are you going to sell it to? Probably the same broker you bought it from and now he’s gonna only give you 39 for it, plus you’ll pay shipping costs etc. Now suppose you do turn a decent profit from investing in metals. What happens when the system does collapse (and it will) then who do you sell it to, and if it is the same broker, what are you going to sell silver for, more silver. I think the precious metal market is a scam. They SCAM the little man into thinking they have beat the system. It’s their game and their rules. Buy food or ammo, you can’t eat silver. Great now the end has happened and I’m stuck with 500 ounces of Silver I can’t sell to anyone. Take care, PREPARE!

IDK but for $2,500 can you really go wrong with 2,000 acres? Next you can hire farmers for $300 a year and with that much land I can afford a nice big boat to import the kibble to a ripe Euro market place. In all seriousness though – how about the ultimate bug out spot…$25,000 for 20,000 acres….gotta be a few hiding spots on that.

Plain Old American,
I’ll tell you one thing you want to be certain you never, ever say to a judge after he gives the soon to be ex everything you worked your butt off for. “Excuse me judge, may I say something?” “Yes”
“Would you kiss me, cause I really like being kissed when I’m getting fuc*ed?” I didn’t think that old fossil could move his gavel that fast as he was yelling “That’ll cost you five days in jail mister!” Woth every minute of it. Thought he was going to burst a blood vessel.As I was being escorted to my new digs I made reference to who I hoped his wife was balling. Nothing like really pushing the envelope!

All those crisp $10 bills in your #10 can will be good for wipin’ you butt, but not much else once FRNs become toxic and no one wants them. On the other hand, when there is a bank holiday right at the beginning of the meltdown, no one’s credit or debit cards will work and no one will be able to get money out of the banks since they will be closed for several days, then your crisp $10 bills will come in handy. (Hopefully) people will still be taking them for stuff so if you have them you will be able to make last minute pickups when others are stuck with nothing. We have a stash of $20s for just that. Make sure you go armed, since others without cash will see you buying and will feel left out, so to speak.

Everyone is so puzzled about Mushroom and what he’s “on”. I can tell you what he’s on. Its called “statium”. It makes you think the state can handle any problem better than real people and without corruption or bias.

Hehe. Today I bought 2 boxes of 30-06 ammo and 2 boxes of 30-30 ammo and a couple other things. Total bill was about $70. I handed the gal a $100 FRN. …and as I did I said, “Here you go! One freshly counterfieted one hundred dollar bill from Ben Bernanke. Funny how he can print them but I can’t.” Everyone that heard me gave a chuckle of the comment. I’m gonna keep using that!

I’ve got a 30-30. One of the Marlin 336’s. They’re a good little gun. I have about 3 or 4 hundred rounds for it. Don’t have an ’06 but I’ve got a .270 and a .300Win Mag. Both are too expensive to buy the ammo for. Been stockpiling bullets, primer and enough reloader 21 and H4831 to cause the fire dept to stay awake nights if they knew…

#47 is more valuable. That’s the element being manipulated. I remember years ago when #46 was under $200/troy oz, back in 2008. First post to state todays price wins a call out. $500 #47 anyone? I didn’t ask for it, just the way it will be soon…

Mac, keep advising people people on what the real investments should be; i.e. food, water. etc.. Silver is still the better PM for bartering. Question: Doesn’t it strike you all kinda odd that the past few years there are numerous companies selling gold as an investment? The buyer gets the PM and the seller gets the paper. Advice to many of you; keep enough fiat paper to cover your property taxes for the next 5-10 years and figure a tax inflation rate of 10-25% increase per year, just to be on the safe side. I find that nobody is mentioning this for the purpose of prepping. Even if the SHTF scenero happins, we’ll still have some entity trying to collect taxes ( state, local, county).

NetRanger: Looks like you had a good day of shopping? I get the same cal. regularly.

Great advice. Chances are that the only people that won’t accept silver/gold when the SHTF is your local government… they’re going to want toilet paper, so it’s definitely a good idea to keep some on hand. The difficulty is that as that 10 – 25% inflation rate hits, the value of your home in terms of dollars (or whatever cash exists) will “go up” as well, also increasing your property tax. While I think cash on hand is a good idea and everyone should have at least a 3 – 6 month emergency reserve, investing in assets (like gold, silver, equipment, guns, raw land, etc.) that you can sell in the future to obtain government authorized exchange notes is an important consideration. All of those should at least keep up with inflation, allowing you to obtain cash to cover those ever rising taxes.

With regards to gold investments: I think that we are seeing the gold bubble starting to get blown, and before it’s all said and done every investment firm out there is going to be selling gold investment packages of some type… This is how we’ll know it’s time to get out and switch over to another asset.

To both Mac and Jim,
I’ve been a student of the stock market and especially PMs for about 35 years now and still advise people on PMs. My own folks didn’t listen when I told them, pre Y2K, to invest in PMs. Last year my folks were bemoaning the point that they hadn’t listened. They lost $48,000 in the stock market during since the election of 2008. My advice is to stay out of the present gold rush, silver for another 6-9 months. Reasoning; it will peak then; confiscation, by the govnment becomes a real possibility.
The rule I always applied; as metals go up, the stock values go down; as gold goes down the stocks go up. Keep an eye on the price of gold (forget the stock market) and an eye on future bank holidays. Many times I’ve asked professionals (Doc’s, lawyers, and cops) that are prepping, if they know when to leave town. Their answer is always ‘no’. What I shared is the advice I’ve given them. And keep an ear out for government payments running late.
There is a lot of bravado among the bloggers (come and get my guns, etc..) who have no idea what live fire confrontation is like. To them I say ‘the phrase that there are no atheist in a fox whole, is true’. My reasoning for this statement is; everything is still tied to the same thought: be prepared. Gold and silver are not the answer for the many that are barely making it.

Great advice there… It’s going to be hard to identify when it’s time to go, especially because we’ll want to second guess ourselves… “this can’t be happening” will be a thought that crosses even a prepper’s mind… At least in our case we would have already run through many of these scenarios (theoretically) helping us to better identify the real thing… There should be various signs… A stock market crash, for example, may not mean anything in and of itself… But a stock market crash resulting from a default in government payments or a Chinese announcement that they are no longer buying us treasuries at all, while gold sky rockets and the dollar breaks through historic support levels is a whole different ball game… For those with BOLs, I’d say better safe than sorry – if it ends up not being the real thing, it’ll be a good training exercise…

@ DRD5508
No one has a crystal ball so it is hard to know if one should “join” the gold rush or stay away. A few years ago I was telling others to “get gold” and they laugh, that’s how I knew I was right. As far as government intervention is anyone’s guess. I do believe were only half way through a commodity boom and we have way more than 6-9 month to go, not to say we won’t have corrections along the way.

I believe when inflation reins in that both the stock market and gold will go up together as blue chips act like commodities in an (hyper)-inflation scenario.

I have a BOL and I am watching the 10yr note and gold. When both rise significantly, it’s time to go.

It took only 35 years for people to regret not listening to you?
Can’t take it when they don’t know you got it. Go to the coin shop with cash and buy junk silver.
Charles ponzi would be so proud of what the US is today.

DRD; I just don’t see the government attempting anything as radical as a “confiscation.” Perhaps buy out attempt to secure the asset for themselves so they can join the elites….here take some of my federal reserve notes. The deal is x number of these future toilet papers for your ounce of y. If the government started doing that it’d be scary, but if they tried taking silver/gold from the gun owners of America watch out. Yes I know most don’t have experience in combat, real shooting sitatuions, but then some do. In fact enough do. Some so much that we’d just assume not have that happen and just take our bullion to a safe location for another day. Its not like any bullion I’ve ever owned is tracked.

I just offered up 10 ounces of silver for a $500 gun here in CA and had the offer accepted. So now I have $500 federal reserve nots for which to go buy 12 ounces of silver; people are getting freaked out there.

If gold and silver are being confiscated by the criminal government, bury it like you would do your arms should the gestapo come for them. Don’t be a craven coward who turns your property into an illegitimate government. If they want my gold and silver I will be happy to give them my lead instead.

The $10 bill stuff from mushroom is sarcasm, but not as funny as you think. They’ve stopped printing them in favor of $100’s – ten spots are too small to be anything except collectors items – they’re going extinct.

Rumor has it that the plan is to also start printing more $1,000’s – expect to start seeing them in general circulation soon…

If you can’t Eat it, Drink it, Smoke it, get High on it, or Fu*# it, DON’T BOTHER WITH IT!!! The first time you lay out an ounce of Gold to get your hands on a Porterhouse Steak to feed to your family, you’ll know what I mean.

You won’t have to spend an ounce of gold to buy a meal. The problem is that they won’t be able to give you change for an ounce of gold. A 90% silver dime is worth about $2.80 but an ounce of gold is worth over $1600. Just not very practical for future barter situations or as an alternative currency.

Our government has swore an oath that the current US currency and bank deposits of that currency are backed by the full faith and credit of the United States Government. If that currency is allowed to fail, so then the US Government fails, and will be forced to step aside. Americans will just say no. There will then be no authority to collect further taxes, or enforce continuity of government laws because no one will back those efforts in either manpower or treasure. Our government cannot function without an abundance of those two things. Food and Barter will be king, but Gold and Silver will still be considered treasure, and those that have it will be the first to restore their lives by rebuilding large farms and infrastructure. The rich will remain rich and most will work for them in one fashion or another.

Talk about hoarding food stocking guns,gold GREEDY AND SELFISH. no better than the rich.we had a garden and shared with our neighbors.we had nine children in our family and were taught to help the elderly cut grass run to the store ect.and not have our hand out.we picked dandilines,mushrooms,blackberries,made our own sourcream,cottage cheese we ate pigs feet sourcroute soup,turtle soup and a lot more.and we were fine. you don`t want to kill someone that is hungry and down on thier luck.we are only a short time here on this earth but the KINGDOM OF GOD will be forever follow the teachings of JESUS CHRIST.

Sorry, John – It is ILLEGAL to share the food you grow, thanks to the “Food Safety Bill” that passed 12/2010 with strong bipartisan support!!. It is illegal to “Clean or Save” heirloom seeds (seeds that breed true). The government will sell you what you must grow and tell you what sprays and chemicals must be used. . . The bill passed mostly unnoticed while we were worrying about nude body scanners stealing our freedoms.

That’s right Ray… it’s the S-510 bill that was deceptively put in the health care bill (don’t want food borne illnesses to be passed along ya know)

..And John, stocking up on food, guns and gold is not selfish and greety, it IS one way to get back at the rich and show them we don’t want their fiat money scam system that they make us all be a part of.

It’s great you have those skills John, now all you need is some gold to protect what you already have.

That’s all nice but you can’t feed everyone. If you have enough food for yourself and your family then each additional person you help would make it more likely that eventually you and your family will starve. I think of the parable of the wise and foolish virgins:

(Mat 25:1-9 NIV) “At that time the kingdom of heaven will be like ten virgins who took their lamps and went out to meet the bridegroom. {2} Five of them were foolish and five were wise. {3} The foolish ones took their lamps but did not take any oil with them. {4} The wise, however, took oil in jars along with their lamps. {5} The bridegroom was a long time in coming, and they all became drowsy and fell asleep. {6} “At midnight the cry rang out: ‘Here’s the bridegroom! Come out to meet him!’ {7} “Then all the virgins woke up and trimmed their lamps. {8} The foolish ones said to the wise, ‘Give us some of your oil; our lamps are going out.’ {9} “‘No,’ they replied, ‘there may not be enough for both us and you. Instead, go to those who sell oil and buy some for yourselves.’

Money has an assigned value by some supposedly superior authority. Money is just a medium of exchange.

Gold and silver are accepted as having intrinsic value. Each party to the transaction accepts the PM as having value. Throughout history, we have seen many mediums of exchange. For many it was salt. For others it was livestock. We may see the day when .22LR rounds are the preferred mediums of exchange. Wasn’t it the island of Yap, where giant stone wheels were money?

In all this, the difference is intrinsic versus assigned valuations.

Kid yourself if you must. Gold and silver (as well as several other items) will become the mediums of exchange. If you think about it, labor is the real medium of exchange. We work to get a medium of exchange that we trade to someone else that worked to make and sell us some do-dad. Skilled labor that is demand will always have a ready market. You might get paid in meals, but you were gonna buy food anyway.

If you can afford PMs, wouldn’t it be a bit prudent to lay in a few ounces? As an economy declines, it becomes a buyer’s market. So just ask yourselves, “What medium of exchange will retain or better still, increase in accepted value?” Hmm, that 20 acres of woods adjacent to my property has lots of firewood and a creek running through it. The sellers are desperate. Gold and silver are mediums of exchange and the word exchange infers trading it for something you determine to have greater value to you.

If you have nothing to trade, you are alone. Commerce reduces conflicts over scarce resources. I have stayed for extended periods (few weeks) in rural Alaskan villages where the $400-500 in my pocket made me one of the wealthiest people in the village. Most of the commerce was barter and skilled labor was always in demand. The cash? T’weren’t worth much as gasoline was $5/gallon and a small can of “beans and weinies” was $1.50 at the village store. Uh, that was 15 years ago in Arctic Village.

Even back then, bartering labor was common and as prices have escalated in the bush, I’m sure that skilled labor and bartering is even more integral to the local economy. Oh, the cash is/was used for imports to the village. Some in Arctic Village moved it to Fort Yukon, the closest place to buy alcohol.

Gold isn’t money because you can’t pay your bills directly with it. However, paying your bills with dollars requires progressively greater amounts. Dollars don’t retain value, they have lost the vast majority of their value over the last 50 years, so they are not money either. So, then, we have no money.

Venture Shadow – You are partially right for the time being in that you can’t pay bills with PM. However it is extremely easy to convert PM to FRNs at any time. While the FRNs diminish in value the PM increases, so it stands to reason that you convert to FRNs only at such time that you meed to make a purchase, ideally spending every dollar you have in paper currency. If things go the way they did in Argentina, Yugoslavia, Weimar Germany, Zimbabwe, and many other places, this strategy will make you wealthy as long as you have a good supply of PM. It’s nice to have mix of denominations ranging from multi-ounce bars to junk silver dimes. I can see a day when junk silver goes for 100X its face value, meaning that a dime is worth $10, making it extremely useful for everyday transactions. Also, I know of no instances where anyone tried to counterfeit a silver dime.

Your statement that we have no money is only true for those with no stash of PM, no farmland with crops, and no skills that are useful to those who have essential things to trade. I hope this does not describe anyone subscribing to and reading SHTF Plan. The larger world primarily consists of the clueless and hopeless but I have much greater expectations for this little online community.

Utah comes to mind “by law” along with a few others waiting in the wings. Small businesses are posting that they accept also. Although I wouldn’t recommend it, not yet. ASE’s & AGE’s are coins, therefore they ARE money. They are not rounds, which is money also, but legal tender.
Strange how most bills can’t be paid with bills either, only checks and electric computer digits. You can’t truly pay a note with a promise or a bill. That’s why there are problems now that have been growing for more than 50 years. Think about that for just a minute and you might “begin” to understand. How do you define majority & value?

It’s good to have skills and knowledge to barter. People are still going to need and will sacrifice or share to have needs met. Intellectual property is going to triple and quadruple in value. I’m stocking up to make up for the fact that I’m poor as crap to begin with.

We took a loan from our 401k and bought gold. We also bought 100 90% silver coins for about $3000 or so. It ended up being only 6% above the spot price for silver. It’s called “junk silver”. To me, it’s the best way to buy silver.

Couldn’t afford my company 401K anyway. The best things about living on a shoestring budget: you have too little to lose to really make a difference (financially) and have also learned how to live skinny and still live well. No cable or satellite, no iPad, iPod, iPhone, Blackberry, no movies or dining out all the time, no senseless partying. Have lived without heat, air, fridge, stove or electricity before – didn’t die and didn’t kill anybody.

There are people who already live “off the grid”, not because they want to but just because they’ve been priced off it. I personally know two and work with one of them. Sad to have a job and still be that poor, but necessity can give birth to some really creative invention. I’ve seen cheap emergency blankets as curtains and a radiator made from salvaged copper flashing and an oil lamp… and it worked.

Mushroom is right !
Stock up on fiat currencies, buy Detroit real estate, get an electric car for when the oil runs out and most importantly buy Chinese !
For any Americans reading this – it’s NOT SERIOUS ! Sheesh…
Maybe Mushroom is an Aussie 😉

Ongoing currency and debt crises around the world will continue to drive demand for gold to record levels. As the Fed has no alternative but to attempt to inflate our way out of the situation, trying to predict the coming price of gold, in dollar terms, is actually very difficult, as there is essentially no limit to the amount of money which can be printed by the Federal Reserve. In the coming months and years, we can only be certain that the price of both gold and silver will be many multiples of what we see today.

A much more relevant question, however, is where is the gold/silver ratio headed?

Although gold is an excellent investment, the rise of the ‘poor mans gold’- silver- has been much more remarkable over the past several years. In the coming months, silver will continue to rise much more quickly than that of gold.

Rather than raise taxes, with a debt based monetary system (the money in circulation = total debt) the Government politicians can ask the Central Bankers (a private banking cartel) to simply have more money printed up (say $100 Billion) & give that money to the US Government to spend in exchange for keeping at the Central Bank an IOU worth $100 Billion for X # of years at Y % interest/year. The US Government then spend the $100 Billion “tax free” any way they want, thus increasing the money supply by $100 Billion. With more money in circulation chasing the same amount of goods & services, the price of everything goes up in price (inflation). So the poor schmucks retired or on a fixed income have their standard of living decline, unlike others in the workplace that can demand higher wages to compensate. The net effect: many millions of people get their wealth/standard of living transferred to the Central Bankers & US Government. It’s a stealth form of robbery! But eventually the Ponzi Scheme collapses as the nation’s currency becomes worthless & the nation collapses financially. The USA is near the end of its Ponzi Scheme, brought about by both Republicans & Democrats over the years since the establishment of the Federal Reserve in 1913. Right now, the European-style Socialist Democrats with Comrade Obama in office are simply accelerating the process more than previous administrations.

We need to move away from a Central Bank & a debt based monetary system back to a monetary system based upon something with intrinsic value (like gold/silver) which the US Government cannot simply create out of thin air. The US voters also need to realize, there is no such thing as a “free lunch”… you can’t get something for nothing. Neither can you get twice the normal benefits for half the normal effort. Otherwise the nation eventually goes bust & we all sink in the same ship.

During hyperinflation the dollar will lose more and more of it’s value. At some point gold will be worth $100,000 an ounce. There’s really no limit on how high it will go.

It’s necessary for people to have old silver coins to use for barter. A 90% silver dime is worth about $2.80 right now. Let’s say gas is $3.50 a gallon. That means 5 silver dimes would buy 4 gallons of gas. What if that remains true no matter how little value paper dollars have?

I couldn’t figure out what I would buy with oz’s of gold, even if someone didn’t think they were fake. So I sold them this year, officially, paper work and all (Hear that, gov? I am no longer a PM owner.)

I have been accumulating US silver coins via cash transactions, i.e currency exchanges. The coins are easily recognizable, denominable, and legal currency.

Yeah, Bill S. When the dollar is worthless, I’ll sell you a chicken for a silver quarter. And I’ll report $.25 on my income tax to keep things legal. Minus the $300 I paid for chicken feed, of course.

Mushroom: I have been withdrawing $500/day at my ATM (the limit). They are all in $20. Am I doing twice as well or half as well being that they are twenties? I am scared, what should I do? I’m on a mule with no name out in the desert.

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